Who can be beneficiary

Spouse Beneficiaries

The surviving spouse has the option of rolling over the decedent's IRA into one for the survivor, thus continuing the potential tax deferral (for a Roth IRA, the spouse must be the sole designated beneficiary).

    * Naming the spouse as beneficiary may minimize federal estate taxes, because such a designation qualifies the assets for the marital deduction.

    * In community property states, the non-owner spouse may have a community property interest in the IRA. The spouse can relinquish his or her community property interest in writing, allowing the IRA owner to name someone else as beneficiary of the IRA.

    * By naming the spouse as the designated beneficiary, the IRA owner can use either of two methods to calculate Required Minimum Distributions: recalculating the spouse beneficiary's life expectancy or using a non-recalculating (term-certain) method.

Non-Spousal Beneficiaries - Individuals

    * Once the IRA owner passes away, the non-spouse beneficiary may have the option of depleting the IRA assets based on his or her life expectancy.

    * The non-spouse beneficiary cannot roll over the deceased's IRA into an IRA in the beneficiary's name alone. However, there are methods by which non-spousal beneficiaries may continue the IRA on a fully or partially tax-deferred basis for many years after the death of the IRA owner.

    * Children and grandchildren can be made beneficiaries of an IRA. However, if the children are minors at the time of payment to them as the beneficiaries, the IRA proceeds must be put into an account for their benefit and controlled by either a parent or court-appointed legal guardian. In many states, this account would be established under the Uniform Transfers to Minors Act (UTMA).

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